Chinatown progress in San Luis Obispo slowed by economy

Editor’s note: This is the first story in an occasional series looking at the status of development projects in San Luis Obispo County.

The sour economy has hampered progress on the long-awaited Chinatown project — the hotel, retail, residential and office complex in downtown San Luis Obispo.

But “we do see things trying to improve now, and we’re fairly optimistic that this is the year when things will start to get back on track a little more,” said Mark Rawson, project architect for developer Copeland Properties.

The Chinatown redevelopment project was approved by the city in 2009 and calls for a 78-room hotel at Palm and Morro streets, 16 condos along Monterey Street, 50,000 square feet of retail space and a 74-space parking lot.

The developers have all of the necessary entitlements to build, city officials said. However, no building permits have been issued and no tenant leases have yet been signed. Copeland Properties continues to look to fill the project with a mix of quality tenants, Rawson said.

“I’m not able to give a whole lot of details at this point,” he said.

Copeland Properties also has been in discussions with “the same hotel operator” from the outset, and that operator remains “equally as enthusiastic and involved,” Rawson added. Rawson declined to name the hotelier, but noted that the hotel industry, too, has been hit hard by the recession.

“The economy is causing everyone to be in a wait-and-see period,” he said.

As part of Chinatown’s approval, Copeland Properties entered into a $3.7 million deal with the city whereby it has the option to buy 1.3 acres containing a city parking lot with 155 spaces, as well as the old Public Works building at 955 Morro St., which is vacant. The land purchase is critical for the project to proceed.

But Copeland Properties can exercise the option only if it meets several requirements. Those requirements include obtaining construction permits, submitting evidence to the city that it has the financial resources to complete the project’s construction, and pre-leasing at least 25 percent of the non-hotel retail and office space.

As part of the agreement, Copeland Properties has a deadline of July 2 to exercise the option, or it must make accelerated payments to the city. The accelerated payments are a driver to move the project along, city officials say.

The developer has a final July 2, 2014, deadline to pay the entire purchase price and meet the conditions of the agreement. At that time, the option fully expires, and if the property has not transferred to the Copelands, the city retains title and all payments that have been made.

Copeland Properties also has been given through mid-July 2015 to comply with the city’s seismic retrofit ordinance, said Claire Clark, economic development manager. The developer is responsible for retrofitting several buildings, including the former Blackstone Hotel on Monterey Street.

“We’re encouraging them to move along and trying to be understanding of their process,” Clark said.Copeland Properties’ Rawson said he isn’t certain when the project would begin, noting that the earliest could be later this year. Retrofitting the existing buildings along Monterey Street, including the hotel, would probably be first, but that depends on how things shape up in the next few months, he said.

“The other part of the project, the soonest that would start would be next year,” Rawson said. “We would still need to get some of the permits together. And we’re not really in the habit of moving forward without firm commitments from potential occupants.”

City Manager Katie Lichtig said the city stands behind Chinatown, noting that it “is an important project for the city and for the downtown core.”

The project is slated to generate more than $590,000 annually to city coffers, much of it from the hotel transient occupancy tax.

But Lichtig is mindful of the economic constraints.

“We continue to support the project and understand that the current economic environment is making it difficult for projects of all types to move forward,” she said.